Allies of the Liberal Democrat peer at the centre of sexual harassment allegations have appealed to the party leadership to avoid a bruising court battle and to enter mediation.

Friends of Lord Rennard, the former Lib Dem chief executive and elections supremo, said he wanted to avoid legal action but that his suspension from the party would have to be lifted first.

Earlier, Lib Dem leader Nick Clegg insisted he would not back down over his demand that the peer must apologise to the four women activists who lodged complaints against him.

The Rennard camp said the peer - who strongly denies the allegations against him - had repeatedly offered to enter mediation in an attempt to resolve the dispute.

However they said that Lord Rennard's legal representative, Lord Carlile QC, was informed last October, in a letter from the independent investigator Alistair Webster QC, that mediation could not take place because the complainants were not interested.

Lord Rennard has now instructed a senior QC to advise him on the lawfulness of a decision to launch a second investigation following claims his refusal to apologise is bringing the party into disrepute.

A friend of the peer said that time was running out for the party to resolve the issue without going to court.

"Chris Rennard genuinely does want mediation, he doesn't want legal action, but the clocking is ticking," the friend said.

Amid warnings that a legal battle could tear the party apart, Mr Clegg admitted his handling of the situation had not been ideal.

But he said he had to demand that the former party chief executive says sorry - even if only for causing "inadvertent" distress to women.

Speaking during his weekly phone-in on LBC radio, Mr Clegg stressed that the conclusions of an independent report into the situation had to be implemented.

"Just imagine if we had done anything else," he said.

"Just imagine if Alistair Webster had recommended that an apology should be issued and I came out and said 'Thank you very much, we will file away the report, and by the way, none of the recommendations need to be accepted or adhered to'.

"There would have quite rightly been outrage."

He went on: "It is messy. It is difficult to confront the past and turn a page and introduce a new culture in any organisation, particularly a political party - quite rightly under remorseless scrutiny.

"But there is no way round my view that I want people in my party, the party I lead, to treat each other with respect, with civility, with dignity.

"Everybody should do that, but there is a special responsibility, a special burden of responsibility, on people who are in positions of power to do just that."

Mr Webster's inquiry found the allegations against the peer could not be proved beyond reasonable doubt but said there was broadly credible evidence that women had been caused distress.

Mr Clegg said Lord Rennard was not acting in his own best interests in refusing to say sorry, arguing it was the "human thing" to do even where distress had been caused "inadvertently".

"I don't think that is fair to the process, I don't think that is fair to the women concerned and in the long run I don't think, curiously enough, it is fair to Lord Rennard because this is a man who gave his life to the party.

"The fact that he is refusing to apologise is, from his point of view, overshadowing all those achievements."

Mr Clegg conceded that the way the allegations were handled when they surfaced last year " was not great, was not ideal".

Meanwhile, the Lib Dems were facing further embarrassment after the leaking of a Portsmouth City Council report into allegations that Mike Hancock MP sexually assaulted a woman.

Mr Hancock resigned the parliamentary party whip last year amid the claims - which he denies - but still sits as a Lib Dem local councillor. The council has said no decision will be taken on the findings of the report, by Nigel Pascoe QC, until a High Court case has been resolved.